SA’s largest short-term insurer, Santam, expects its profits to fall by as much as 37% in the year to end-December.
Its headline earnings per share, which strip out one-off items, will drop by 17%-37%, mirroring lower underwriting results and investment income.
The trading update reflects the fallout of the deadly floods in KwaZulu-Natal nearly a year ago when claims spiked as result of extensive damage to infrastructure, which included homes.
Santam and other short-term insurers also felt the post-pandemic-related effect as personal claims normalised throughout 2022 after coming down in 2021 when people were largely confined to their homes.
However, the frequency of load-shedding and its effect on the electrical appliances could pose another challenge for short-term insurers.
The investment return on insurance funds was affected by volatility in local and international bond markets, as well as subdued equity market returns, it said in a statement.
Bond markets took a hammering in 2022 when central banks in developed markets in particular normalised their interest rates at a rapid pace to tame historically high inflation. Equity markets also came under pressure, though they staged a strong recovery towards the end of the year.
The net underwriting margin is expected to be at the lower end of the long-term target range of 5%-10% of net earned premiums, reflecting an improved performance in the second half of the 2022 financial year.
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